Paying Off Good Debts Can Actually Hurt You
Got a call the other day from one of my buyer clients. Being the wonderful clients that they are, they naturally called me to give them some advice on paying off their credit cards in preparation to purchase their first home here in Salt Lake. ( Note: I love clients that call me BEFORE they do something…it makes me feel all warm and fuzzy as well as keeping my stress level down!)
[button link=”http://saltlakehomefinders.com/2009/11/11/you-might-be-turning-your-realtors-hair-gray/” newwindow=”yes”] Read Things That Make Your Realtors Hair Turn Gray![/button]
My clients were under the opinion that in order to purchase their first home, they must be debt free, so they were planning on paying off all credit cards and closing the accounts to demonstrate to their lender that they were indeed responsible borrowers
So, being the well trained Realtor that I am, I asked the probing question “Who advised that you needed to pay off your credit cards and close the accounts?” As it turned out, they had not talked to anyone, but they wanted to have only the debt of the mortgage encumbering them….
and don’t get me wrong…
Paying Off Debt is ALWAYS A GREAT CHOICE
However, in closing accounts, my home buyers could very well have lost the credit rating they have so carefully nurtured all these months cause when you close the credit card accounts (or anything else that shows up on your credit as a positive), that line will no longer report and with no recent credit history, credit scores can actually Drop!
Totally paying off creditors is a noble move, and one we should strive for, but when preparing to purchase home, it can be the death of your pre-approval, and ultimate loan approval if you make drastic changes like paying off your credit cards and closing accounts.
So, the lesson here, should you choose to accept it, is to check with your LENDER (and with us of course) before you pay Anything, or Close Anything when you are working toward purchasing a home. [box] Special Note Here…if you have not talked with a lender yet, never fear! We have a great one to recommend. Lance is an expert in all the first time homebuyer programs, and can answer all your questions without all the Mortgageeze that is spoken by most loan officers we know. (He tried to use it once with me and I hit him with a pencil…I know childish…but it got the point across…no pun intended!)We know that he knows how to treat our most important clients (You!), so give him a call.[/box]
Come on, keep your Realtors happy and healthy (stress is not good for us) and check with us Before you make decisions that can affect you! We don’t bite, we won’t yell (well, we got annoyed one time when our client quit his job 2 days before closing…but we didn’t yell), and we are really easy to talk to! So CALL US!